Share this post

Tags

Wage Hike in Cambodia Rises Higher Than Expected

Next year, garment workers in Cambodia will be earning 11 percent higher wages. The agreed upon increase was higher than originally outlined, and workers’ unions—though pleased for now—have already committed to continuing the fight for fairer pay.

In August Cambodian Prime Minsiter Hun Sen passed a benefits package that would have seen workers’ wages rise from the current $153 per month to $168, an almost 10 percent jump. The final settled-on wage, however, was $170, an 11 percent jump. The higher rate followed Hun Sen’s stream of meetings with garment workers—who have largely protested his government and there’s a general election set for 2018. The new pay rate will take effect from Jan. 1, 2018.

The problem for Cambodia, as has been the case in many low-cost sourcing countries, is the battle between giving workers better pay and maintaining the country’s competitiveness.

As such, the country’s Ministry of Labor and Vocational training said, according to Reuters, that the Cambodian government will continue to hold off on taxing textile sector profits and will eliminate export management fees.

In the last five years alone, wages in Cambodia have increased more than 150 percent, climbing from $61 per month in 2012 to the present $153. If hikes continue at that clip, wages in Cambodia could reach $384 a month by 2022.

Not surprisingly, workers unions in Cambodia and garment manufacturers are divided over how the hike—and future hikes—will impact the country’s garment sector.

Pav Sina, president of the Collective Union Movement of Workers, said higher wages won’t make Cambodia less competitive. “The prime minister always adds it every year, this is appropriate to what we tried to achieve,” Pav Sina told Reuters, implying perhaps that the wage rate is climbing at an agreed-upon pace that’s in keeping with general inflation.

Adding separately in local reports, however, Pav Sina said the hike was welcome but still insufficient.

“$170 is not enough for a decent living yet. However, it is a good start for this year to increase the minimum wage to this level plus other benefits offered to workers which are paid by employers,” he told Radio Free Asia.

Other benefits in the new package include free health care from employers and free access to public transport, which employers will also be expected to pay for or provide.

From the garment manufacturers’ perspective, the new wage rate could mean tough times ahead.

With the hike, Kaing Monika, deputy secretary general of the Garment Manufacturers Association in Cambodia, told Reuters, the minimum wage is “beyond the affordability of some of our members and the competitive level of the country.

By comparison, minimum wages in neighboring Vietnam will rise 6.5% to between $121 and $175 (depending on the region) at the start of next year. In Myanmar, which is also close by, battles are ongoing for what could end up being a 55 percent wage jump, bringing the country’s monthly pay rate from $67 to $99, and making it a much more cost-competitive sourcing option than Cambodia.

For the year to date, according to data from OTEXA, Cambodia makes up a 2.6% share of U.S. apparel imports, compared to 14.4% from Vietnam and Bangladesh’s 6.6% share. Myanmar’s share remains too small on the global scale to say much about as a point of comparison.

VF Corp. said it will reinvest roughly $100 million back into its business to make it more agile and consumer focused, even while dealing with implications of the new Tax Act on its multinational operations.

This content is for Annual, Monthly and Limited members only. You can read up to five free articles each month with a Limited Level Subscription. Please log in, or register.Log InRegister

Thank you for your interest in Sourcing Journal. It appears the email address you are using to subscribe is linked to a Corporate group account; however, you have not entered the required code.

There is a subscription code available that will allow you to subscribe without a credit card and at no cost to you. If you do not have this code, please click the link below and you will receive an email with the code and a step-by-step guide to subscribe using the code.

Thank you for your interest in Sourcing Journal. It appears the email address you are using to subscribe is linked to a Corporate group account; however, the code you entered does not match the domain for the email address you entered.

If you do not have the correct code, please click the link below and you will receive an email with the code and a step-by-step guide to subscribe using the code.

Thank you for your interest in Sourcing Journal. It appears you are attempting to subscribe using a code that is restricted to a Corporate group account. In order to subscribe using this code, you must use your company email address that is linked to the code. The email address you entered is not the correct one for the code you are using.

The email address you entered is linked to an existing University account. Therefore, you are authorized with unlimited access to all Sourcing Journal articles and pages through your campus network, or by logging in remotely through the University portal. You do not need to create an account, or log-in. Simply being on your network will give you unrestricted access.